Tax Helps Arkansas Hospitals Stop Bleeding

by Mark Friedman  on Monday, Oct. 3, 2011 12:00 am  

This year, Arkansas Business' list of largest hospitals and medical centers shows a sharp change from previous hospital lists: Most made money in 2010.

(Click here to see a PDF list of the state's hospitals ranked by revenue. A spreadsheet version is available for purchase.)

On the list, 64 facilities out of 98 had a net profit if the hospital's fiscal year ended in 2010 or later. Just two years ago, 52 hospitals out of 94, or 55 percent, reported losses.

The swing to profitability can be attributed to the Medicaid provider tax for hospitals, which went into effect three years ago, said Paul Cunningham, the senior vice president of the Arkansas Hospital Association.

That provider tax has pumped about $140 million into Arkansas hospitals. It is distributed to hospitals based on factors such as each hospital's Medicaid load and patient volume.

Even with the extra funds from the Medicaid provider tax, however, some hospitals fell short, Cunningham said. The total reimbursement payments to hospitals cover only between 85 and 90 percent of a hospital's cost, he said.

Arkansas hospitals are expected to lose about $1.4 billion in reimbursement during the next decade as a result of the Affordable Care Act of 2010, Cunningham said.

It remains unclear, though, if the hospitals will recoup these losses through other revenue streams, such as insurance carriers since people will be required to have insurance by 2014.

Hospital administrators fear more cuts are looming.

On Sept. 19, President Barack Obama released his plan to reduce the nation's deficit by $3 trillion during the next decade. Part of his proposal called for a $320 billion reduction in federal spending on Medicare and Medicaid.

It was unclear how those cuts, if approved by Congress, will affect Arkansas hospitals, Cunningham said.

One of the biggest turnarounds on this year's list is Sparks Regional Medical Center in Fort Smith. It posted a $23.6 million loss for its fiscal year that ended in June 30, 2009, to a net income of $34.9 million for its fiscal year that ended Dec. 31.



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